Many Bored Apes NFTs Are in danger of getting liquidated as borrowed money comes back to bite them.
Dozens of NFTs once pledged as collateral for loans sat perilously close to being forced into liquidation, and there was concern that could lead to even more forced sales.
The issue is that Bend DAO, a P2P lending platform for Ethereum collectibles, has been experiencing some issues. It’s unclear whether these issues are related to the recent drop in ETH prices.
With the price of ETH dropping, some of the Bored Apes with ETH tied up in their loan contracts are now in the “DANG” (or “DANGer”) range — which means they’re close to being sold by the lending platform for less than they were lent out for.
The 272 Bored Apies are one of the most valuable assets associated with the Bend DAO project. They represent 2.72% percent of the total number of assets associated with the project.
It’s possible that a mass liquidation event could affect other NFT lenders and that Bored Apes may be one of the most affected ones.
“Short-term fluctuation in NFT prices is normal,” Bend DAO said in a press release. “There was no consensus on blue chips NFTs in one day. It won’t collapse overnight.”
Most people holding Bored Apes (the digital currency for trading digital collectibles) bought them back when they were worth about $125 each. Now that they’re worth less than half that, most collectors can simply repay the loans plus interest to get their Bored Apes out of the game.
One of the issues is that the crypto market is not stable. For example, when Ethereum (ETH) rises, there may be less demand for loans because people want to buy Ether instead. When the value of Ether falls, lenders may sell their tokens to raise cash. As a result, borrowers who borrow using these tokens may lose money if the loan is sold at a lower price than the original purchase price.
With the increasing number of liquidated NFTs going “on sale “ through liquidation auctions, collectors are beginning to shop for discounts on these collectibles. On BendDAO, bids on auctioned NFT collections must be within 5% of the floor value, no matter how attractive they may seem.
Franklin has 60 apes
One prominent NFT collector known as “Franklin” quickly came under scrutiny as the largest borrower on BendDAO, having borrowed more than USD 10 million worth of crypto assets. However, Franklin later claimed that he had already repaid his debts.
As with most things in the crypto sphere, the actions of a few individuals can affect the whole ecosystem — even if they don’t intend to.